Chinese Yuan takes a giant leap

Chinese Yuan and global stocks trending points

Soothing comments from World’s top central banks including US Fed helped global stocks to secure a solid start, yet on Friday, the MSCI global stock index was inched lower by 0.12 percent, after a straight four-day-rally.

While the global stock outlook appears to be mixed amid unnerving manufacturing data from Paris, Shanghai and Germany, signalling an orchestration of upcoming global-scale financial weakness, the Chinese Yuan capped its best week since 2005.

On the global Forex market, the American dollar had been on course for its fourth straight week of fall against world’s top countries, after hitting a three-month low yesterday (94.60).Among all of the top currencies posting heavy gains against American dollar, Friday’s market displayed a giant leap for Chinese Yuan, as it secured its best intra-week gain against American dollar since July 2005. After JPY flash crash earlier this month, Chinese Yuan’s gain should be considered as a tremendous milestone as well as a seismic move, since it had appeared against the backdrop of a sensitive trade negotiation, that factually forced the Chinese commerce ministry to accept the US proposals of purchasing a large import of US agricultural goods and oil as well as forced technological transfer and IP agreement.

While this report is being written, even some corporate clients in foreign banks in China seemed to sell their American dollar, signalling further bearish momentum upcoming for the USD/CHN pair.

USD/CNH daily price chart

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In the face of a new year rally, the stock markets had been lifted by promises from US Fed Chair Jerome Powell and ECB did not seem to be interested in hiking interest rate before 2020. While the trade talks between US and China had also helped to boost the global stock indexes, the Friday’s market did not appear to be as riant as it was in the last four days.

During the late European trading session, the MSCI’s index of global stocks, that keeps track of 47 country’s stock exchange, posted a slight loss of 0.12 percent, while the Germany’s DAX and France’s CAC both had rolled in to the red and a pound surge jolted the Britain’s FTSE 100 lower.

Bottom Line

Apart from the trade talk optimism, a higher oil price also boosted the Chinese Yuan’s gain against American dollar. Several market analysts had been quoted saying that the sentiment in favour of Chinese Yuan has greatly improved, while the crude oil prices remained well-supported and the terms of trade truce may be implemented earlier than anticipated.

While this report is being prepared, Jan 11th, Friday, GMT. 15.30, the USD/CNH pair was down by 0.48 percent at 6.7598, after it breached its July 19thlow at 6.7380 earlier in the Asian trading session and market news, alongside, investor’s confidence indicates a firmly bullish Chinese Yuan.

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